Republic of Korea – Gas Policy Brief

The Republic of Korea’s energy use per capita is among the highest in the world and it is the world’s ninth-largest consumer of energy, mostly derived from fossil fuels.

The role of natural gas and its integration with renewables development in long-term planning is expected to be critical in achieving a carbon neutral target by 2050 and a reduction of 40% in carbon emissions by 2030 from 2018 levels.

For decades now, Korea has depended on imports of oil, coal and natural gas for well over 90% of its energy needs. In 2019, it was the third-largest importer of LNG in the world.

The current government came to power in 2017 promising to accelerate the transition from fossil fuels to renewables and lower carbon sources, and phase out nuclear.

The Third Energy Plan set a 2040 target of a 30-35% share for renewables in the primary energy mix and a greater role for gas but was less specific about targets. The master plan sticks to the long-term perspective, allowing for policy flexibility as to how it may be achieved but there is yet no clear roadmap as to how the change will be achieved. It proposed a focus on energy efficiency to reduce demand by 18.6%.

Under the Ninth Basic Plan for Electricity Supply and Demand for 2020-34, 24 of the 60 coal-fired power stations currently under operation are to be converted into natural gas-fired power plants by 2034. Their combined capacity of 12.7 GW would boost LNG demand and imports. In all, under the plan, LNG-based plants would have a capacity of 43.3 GW in 2022, 55.5GW in 2030, and 59.1 GW in 2034. The gas share in the production mix, however, would decline slightly by 2034, due to the planned rise in renewables.

The greatest uncertainty is how the government will achieve the growth of renewables from 6.5% of the power generation capacity in 2020 to 42% in 2034, increasing capacity more than three times in 15 years with the Green New Deal prescribing that capacity will more than double over the next five years

Renewable targets are aggressive, increasing capacity from 20 GW in 2020 to 78 GW in 2034. The plan noted that while the rated capacity of renewables would treble to 40% of the total, they would represent less than 10% of actual generation in 2030 due to intermittency, reinforcing the importance of gas-fired power to complement renewables.  This gives gas a more complex role in the power mix as it will be required to provide both baseload and peaking power to ensure system reliability. The Ministry of Trade, Industry and Energy (MOTIE) expects this to lead to a 15% rise in LNG demand from 42 MTPA now to 48 MTPA in 2034.

A quarter of the nuclear plants (seven) will be retired by 2034 when nuclear’s contribution to energy generation will drop to 10%, and all plants are expected to be phased out by 2050. By planning this phase out, the current government removes an obvious candidate to replace fossil fuels in the mix. Given the success of its nuclear power programs with its well-developed supply chain and ability to export nuclear power plants, it is very likely that a future government will simply cancel this part of the plan.

Meeting its carbon targets will require decarbonisation efforts across all energy sectors, removal of regulatory and institutional barriers, introduction of flexible market designs, and deployment of the country’s advanced technologies and innovative capacity. The government’s Green New Deal in July 2020 was a significant step towards accelerating the transition. It aims to increase the number of electric vehicles from 90,000 at the end of 2019 to 1.13 million by 2025 and increase the number of hydrogen-powered fuel-cell electric vehicles on Korean roads from the 5,083 sold in 2019 to 200,000.

The Ministry of Land, Infrastructure and Transport in 2019 announced plans to build four pilot hydrogen-powered cities by 2022 with a view to transform 10% of the country’s counties, towns, and cities to hydrogen power by 2030, and 30% of them by 2040. If this vision succeeds, hydrogen will account for 5% of projected power consumption by 2040.